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The Canada Revenue Agency (CRA) calculates your RRSP deduction limit based on your earned income in previous years. Your deduction limit is based on 18% of your earned income (employment earnings, self-employment earnings, and other considerations) to a maximum value for the year including, any unused contribution room. TFSA contribution room is not based on your income. Every year, you may contribute up to the TFSA dollar limit plus any TFSA withdrawals or unused contribution room from previous years. Be aware that there are penalties for exceeding your contribution limits. You may check your TFSA and RRSP available contribution room by using the CRA’s My Account or by calling the Tax Information Phone Service (TIPS).

To learn more about how TFSAs and RRSPs work visit GetSmarterAboutMoney.ca. Speak with a registered financial representative or tax professional for advice that fits your personal situation.